All Forum Posts by: Myles Taccini

@Brad Sneckner First of all thank you for your lending your subject matter expertise! It's much appreciated. 

That's interesting, I hadn't heard about the delta between rental income and monthly expenses being a hit against income rather than liability. That will definitely help with achieving a better DTI.

Noted about using 1 lease vs. multiple. Any issues you see if a long-term lease has been completed and moved to month-to-month?

Thank you!

Thanks @Nick Belsky for the great suggestion. I may need to end up going with some sort of private lending. I'm a bit new to it however, it sounds a bit like hard money. Is there a reason a private lender would be willing to invest and receive similar interest rates as a bank or credit union? What would be in it for them?

I've looked into DSCR however I believe the minimum down payment is 20%. For the type of properties I'm looking at here in southern California that would require minimum 100k which is a bit more than what I'm looking to put down.

Great suggestions and I appreciate the advice. 
 

I hear you, it's a bit tough in hot markets, but I'd love to stack up 2 or 3 properties here where I know rent can roughly match the monthly expenses, even if there's no cashflow. Good luck investing OOS!

Sounds good @Peter Mckernan. I think I need to get in touch with those brokers! Haha. I've been calling up some credit unions the last couple days and have gotten a whole range of different criteria, none so far being as simple as having a lease and a couple months' rent. Thanks again. 

That's very interesting, I hadn't heard of that before. If I understand, it might be something like 2 year average of income taxes from the first 2 bedrooms, plus 75% of the lease agreement from the final bedroom? 

That's a good point about classifying the second property as a rental rather than primary. The 20% down payment is tough to stomach though! haha. Thank you for the insight and advice. 

@Mike Davis Thanks for the suggestion. If I'm having some trouble qualifying I may dip my toes into HML, I haven't done so before though. I'll need to research that a bit more thoroughly.

@Peter Mckernan, thanks for the advice! It's much appreciated. If I understand correctly, with the lease showing for the final bedroom, a lender should be able to count the rent of the full unit, rather than just 2 bedrooms? Would you mind clarifying what you mean "they will confirm it last 60 days of rent, but you have 75% of that showing?" 

I've talked with a couple of credit unions who've indicated that they would either go off of 1) rental income listed on tax returns or 2) 75% of expected rental value. In your experience or from what you've seen have you been able to count 100% as long as you've had signed leases in place?

Thanks much!

Hi fellow BPers!

As the title states I have an issue with debt to income I'd like some perspective on, if possible. My situation:

- I live in Orange County, California where 3br condos go for minimum 500K

- I own 1 condo (3 bedroom), looking to purchase a second (3 bedroom)

- The current debt obligation of the condo I own is $2300/mo (PITI + HOA)

- I live in 1 room, and rent the other two rooms for $1650/mo total

- I plan to move out of the last bedroom and rent out the last room in the condo for a total rent collected of $2400/mo, which seems entirely feasible, if not a bit under market average per rentometer.com

- Monthly gross income from day job ~$7000

- No other debt obligations (car payments, student loans etc.)

I'm wondering if I'll be qualified for a mortgage on a second condo, of let's say $500k. At face value, my DTI ratio is too high, as the lender will likely do one of two things:

A) Use previous tax returns showing I'm collecting $1650/mo in rent, and subtract that from my monthly obligation ($2300) leaving me with a net loss on the first condo of $750 ($2300-1650)

B) Take 75% of expected rental value (let's say 75% x 2400 = 1800), and count the difference of 1800 and 2300 as a net debt against me for the first condo.

As such, when combining the "debt" of my first condo (although I don't personally see it this way) with the debt of the second condo, my DTI will likely be above what most banks and credit unions are willing to lend on.

However I believe I would still be a quality borrower of money, as my current condo will be rented for slightly more than my monthly obligation, plus I would be renting out 2 rooms in the new condo, leaving me with an estimated monthly payment of 800-1000/mo (accounting for PITI + HOA - Rent collected) for both condos combined, still well within reasonable affordability for my W2 income.

If anyone can speak from experience, are the way lenders see these calculations variable from lender to lender, and should I just plan on reaching out to a dozen or so lenders/credit unions? Would a hard money lender be more willing to hear me out on something like this? Or does anyone have any known workarounds or input/insight about qualifying for a second loan?

Thank you so much for any advice you're able to give this newbie!

-Myles

Awesome advice, thanks @Raul R.Looking into warrantable v. non-warrantable condos right now.

Seems like with a condo there are simply a lot of factor's that are outside of the investors' control. 

Hi Biggerpockets,

2 points:

A) I've been looking more into Condos in the Los Angles/Orange County area lately. I've seen data that, over the last 20+ years, appreciation with condos has been equal with that of SFRs in each SoCal county. As well, with a lower purchase price compared to SFR with slightly lower rent than SFR, the price-rent ratios for condos are better than SFR's in southern CA (even accounting for HOA). This is what's attracting me to the idea of targeting condos rather than SFR's, although as a newbie I'm looking to understand what's likely wrong with my interpretation of this. My thoughts are that if an average condo is appreciating at the same rate as (or close to) an average home, and has a better price-to-rent ratio, why do condos get such a bad wrap? Do condos make more sense in expensive markets like LA/OC, SF, NYC? I guess I'm looking for someone to convince me otherwise...I'm all ears, just a newbie looking to learn!

B) I know of someone looking to sell their condo, but want to know if it's realistic to ask the seller for information such as HOA financials, previous HOA meeting minutes, any other info about how the HOA is run. Should I ask the seller for these documents before making an offer? Or is this information I should be asking from the HOA themselves? If so, how would I go about finding the info before making an offer? Any personal experience would be very welcome.

TLDR: Why do condos get such a bad wrap if they've shown good appreciation and price-to-rent? How can I get HOA information about a condo I'm interested in?

Thanks much!

@Robert Chuang and @Jeffrey Isenberg Awesome, I'll try to make that one. Definitely interested in value-adding via ADU's.

Thanks @Guifre Mora. I don't see any upcoming events on meetup but I'll be interested in going once there are. Thank you for the suggestion.